Verizon Refuses to Pay Portion of Tax Bill to Rural Communities

Telecom company argues it doesn’t need to pay where it doesn’t deliver landline service to majority of local customers

Scores of towns in South Jersey are losing much-needed revenue because of an tax court decision that has led Verizon New Jersey to stop paying a portion of its tax bill.

The telecom company’s reading of the three-year-old ruling is that it no longer needs to pay the business personal-property tax to municipalities where Verizon no longer provides traditional landline phone service to a majority of local phone customers.

At its peak, the tax on equipment, utility poles, and cables provided about $120 million in revenue to towns, but since Verizon informed towns it would no longer pay where it does not serve 51 percent of residents, the total is now in the $40 million to $50 million range, according to a company executive.

The dispute is especially galling to communities that have been fighting with Verizon over what officials perceive is the neglect of traditional copper-wire phone service in a rural area where few, if any, competitive offerings are available.

“We’d love to have competitive services,’’ said Gregory Facmyer, a township committeeman in Hopewell in Cumberland County, which lost the tax court case back in 2012. “They’re not there.’’

Hopewell is one of 16 towns in South Jersey to have petitioned the state Board of Public Utilities to investigate Verizon’s old copper-line phone service, which officials claim is plagued by service-quality problems.

Verizon is the only telecom company in the state that pays the tax, which puts it at a competitive disadvantage, according to Gina LaPlaca, director of state governmental affairs for Verizon New Jersey. “We only want to pay what we owe,’’ she said.

With the widespread reliance on wireless and other new technologies, Verizon has seen its once dominant hold on the wireline sector shrink dramatically from 4.5 million landlines to about 1.3 million today, LaPlaca said. Verizon New Jersey loses money on the service, she added.

Noting the company’s parent makes $16 billion in profit, at least one lawmaker expressed skepticism about the scale of the problem. “It’s a little bit extreme to say it is going to hurt Verizon’s bottom line,’’ said Assemblyman Andrew Zwicker (D-Somerset).

But it does hurt local communities, according to Jon Moran of the New Jersey State League of Municipalities.

“This unintended erosion of the local tax base will hurt all other property taxpayers in these and many more communities in the years to come,’’ Moran said.

To help the towns, Assemblyman Ralph Caputo (D-Essex) has drafted a bill (A-184) that is designed to clarify a 1997 law dealing with the issue and ensuring that municipalities do not lose tax revenue.

Moran compared the local revenue base to a three-legged stool, comprising property taxes, energy-receipt taxes, and the tax at the heart of the dispute.

“It’s important to pass this law so that three-legged stool is not any more wobbly than it already is,’’ he said.

Business lobbyists, however, oppose the bill.

“This is really about tax fairness and whether it is applied fairly,’’ said Tony Russo, representing the Commerce and Industry Association of New Jersey. “This is any outdated law that hurts the company.’’

Caputo talked about the fairness to local property taxpayers, questioning what would happen if “any individual taxpayer said they are not paying their (tax) bill because they don’t use it anymore.’’